The economics of Ferguson

While the world is watching Ferguson, Mo., it is useful to examine how this inner-ring suburb is emblematic of many unfortunate economic trends in America. In 2010, the town was more than 67 percent African-American, a demographic particularly hit hard not only by the Great Recession but by disruptions with a longer arc.

The homeownership rate in Ferguson was almost 10 percentage points lower than the state’s as of 2012. Median household income of $37,517 compared with Missouri’s $47,333 (Seattle: $63,470). Twenty-two percent of the population was below the federal poverty level vs. 15 percent statewide. This despite the world headquarters for Emerson Electric being nearby.

As of July, the national unemployment rate for African-Americans was 12.2 percent. For those aged 16 to 19, it was a staggering 36.8 percent (a year earlier, it had been 42.9 percent). For whites, the comparable numbers in July 2014 were 5.6 percent and 18.9 percent.

My former colleague Drew DeSilver, now at the Pew Research Center, recently wrote this assessment of the persistent gap between black and white unemployment. While economists may be searching for definitive answers, some historical facts present themselves.

St. Louis is a classic example of a city that experienced massive white flight, going from 857,000 in 1950 to 318,000 last year. St. Louis County went from rural and small towns to suburbia. A few suburbs, such as Ferguson, later attracted African-Americans. Like all Midwest metros, St. Louis also suffered as factories closed, work was sent offshore and local companies were lost to mergers. The jobs that once provided a ladder up for minorities — when discrimination was not prevalent — went away. Public transportation wasn’t adequate between poor areas and job centers.

According to a Henry J. Kaiser Family Foundationanalysis of Census data, 35 percent of African-Americans were below the federal poverty line, compared with 13 percent of whites and 33 percent of Hispanics. In Missouri, the number for African-Americans was 37 percent.

There is no simple explanation. One little-discussed factor is the lack of intergenerational wealth. During the Jim Crow era, it was nearly impossible for most African-American families to amass savings and property to pass on to their children. When pockets of a black middle class appeared in segregated America, they were subject to discriminatory financial and property ownership policies and laws. Some, such as Tulsa, Okla.’s prosperous Greenwood District, were violently attacked by whites who didn’t like such “uppity” behavior.

In the early decades of the 20th century, millions of African-Americans fled the sharecropping poverty of the South for manufacturing jobs in the north. But they faced discrimination and lower wages, often being diverted into dead-end jobs. Tensions were high when Southern and Appalachian whites migrated to the cities, too. When Packard Motor Car Co. promoted three African-Americans to work alongside whites on the assembly line, it was a contributing factor to the 1943 Detroit riots.

So while all Americans should celebrate the rise of a robust black middle- and upper-middle class since the end of de jure segregation, the burden of the past is heavy.

So is the history and current practice of under-funding the schools in minority districts. Sixty years after Brown v. Board of Education, schools remain stubbornly segregated by race and income. This leaves students at a permanent disadvantage. Meanwhile, in the run-up to the financial collapse, banks targeted blacks for sub-prime mortgages, even those who would have qualified for prime loans.

The poor of all races are burdened by low-wage, dead-end jobs (we ended “welfare as we know it” under Bill Clinton). Mothers lack free day care, America being the only advanced nation with this impediment to rising. Things many Americans take for granted — a trip to the doctor, paying the rent or mortgage — are grindingly difficult or fearful monthly events for the poor.

Today, the Tea Party and right-wing media scare whites who are seeing their incomes stagnate or fall into believing it’s because people of color are getting something they don’t deserve. In fact, struggling whites and blacks are being hammered by the same forces of oligarchy, industry concentration, financialization, de-industrialization, rent-seeking and offshoring of jobs. As in the Jim Crow South, it is interest of the elites to prevent whites and blacks from seeing their common foes.

Now, not to get all Pat Moynihan and Bill Cosby, but every underclass, including the African-American, carries agency and bears personal responsibility. Showing up for work on time, being able to speak the Queen’s English, and dressing appropriately on the job are not selling out and “acting white.”

None of this is to imply that economics explains the world, or Ferguson. It’s a complex situation with many facts still unknown. But as long as so many of our fellow citizens are cut off from economic opportunity, it will prevent the entire nation from maintaining its power in the world. Say “power” and most people like that much better than “justice” or “morality.”